Bottlenecks, labour issues and planning-to-construction delays are hampering the development of new homes in Western Sydney – an area that's critical for the city's housing supply.
A new report has warned of "progress on paper" only in Western Sydney, with dwelling completions far behind where they need to be. Image: Getty
A new report has broken down the data, revealing a stark disconnect between residential development approvals and real-world construction unfolding in Western Sydney.
Dubbed an economic powerhouse primed for strong growth, Western Sydney is home to one in two Sydney residents, according to a report from the National Australia Bank.
Over the next decade, Western Sydney is predicted to grow by 25% to 3.2 million people, with suburbs like Bonnyrigg, Cobbitty, Tregear, Austral and North St Marys among the top five growth suburbs in the region.
NAB’s report points to historic levels of investment pouring into Greater Western Sydney, with new roads, hospitals and schools opening up, seemingly overnight.
But Ray White Commercial Western Sydney has looked at the numbers, reporting a concerning gap between residential development approvals and construction rollout.
There are around 80,000 dwellings sitting in the development pipeline, but just 15,773 approvals were granted in 2024/25, representing a 38% shortfall against annual requirements of 25,636 dwellings. Construction activity is even further behind, with 5,369 units under way across the region.
Updated demographic modelling has moderated the area's annual housing requirements to 25,636 dwellings, down from a 2024 peak of 33,596. This is not due to demand, instead reflecting a recalibration of growth expectations amid migration and housing pressure.
The report reveals that the region continues to absorb the lion’s share of NSW’s population growth, with 57.7% of the state’s population increase, and nearly 60% of non-detached dwelling approvals.
Low flying figures
Growth in Sydney’s South-West precinct is driven by the development of the Western Sydney Airport (to open in 2026) and a multibillion-dollar infrastructure investment. It is now the fastest growing sub-region of the state, but construction is not keeping pace.
The gap between planning approval and project commencement remains one of the most critical challenges, with land constraints, funding issues and bureaucratic lags all contributing to the lack of completed homes, the report reveals.
“We’re building an economic hub with nowhere for the workforce to live. If housing doesn’t keep up, the airport boom could become a policy failure,” Peter Vines, director of Ray White Commercial Western Sydney said.
Recent reforms designed to boost medium-density housing near metro stations have shown promise in established areas like Parramatta and The Hills, but have done little to alleviate housing stress in outer corridors such as Camden and Liverpool, the report found.
While material costs have cooled, labour shortages continue to hamper delivery across the region’s growth corridors.
“The capacity to build simply isn’t there right now. We need to scale up our skills and embrace new methods, modular, prefabricated and green construction, if we want to close the gap,” Vines said.
Despite three interest rate cuts bringing the average borrowing cost to 3.6%, the most favourable environment in years, and a surge in investor lending exceeding $12 billion per month, supply continues to fall short.
“This is a housing crisis hidden in plain sight. The numbers suggest progress on paper, but the physical delivery of homes is falling dangerously behind.
“The money is flowing, but the homes aren’t. Investor appetite is high, but limited stock is holding back market momentum,” Vines says.
Adding to the demand surge has been the launch this month of the 5% deposit scheme, which will allow buyers to enter the market with as little as $40,000 on an $800,000 property, compared to the traditional $160,000 deposit that would be required.
“This is a generational policy shift. But without new homes, it risks fuelling price inflation rather than improving access,” Vines says.
“Western Sydney isn’t just the future of NSW, it’s the present. But if we don’t turn plans into homes, we’ll undermine the entire growth model.”
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